Bailout Fails. DOW Plunges 778 points. What do you think?
 

What are your thoughts on the bailout? Should it have passed? What would you like to see done by the politicians?

Personally, I think that the finance institutions should have been allowed to fail. While it would be painful for everyone, it is what happens when the music stops and there isn't enough seats for everyone. The Visa card commercial comes to mind at how easy it is to just spend money, money that you don't have, money that you've not yet earned, money that your children, and your children's children have not yet earned.

Smaller institutions with better books would have picked up the pieces and started the process over.

As far as oversight is concerned, I'm not convinced that their form of regulation would be beneficial. After ENRON/Tyco/Worldcom/Adelphia fiascos, some sort of oversight is needed, but Sarbanes-Oxley is a joke and doesn't do anything but make it harder for these companies to do business.

Finally, why let only some of the few reap the benefits of profits when taxpayers will be taking on the risk and getting very little for their share of risk.

I tend to agree that the companies should just take their lumps. Of course that will make things difficult for a while, but it's not like the companies didn't know what they were doing. Can anyone honestly say they didn't think they were writing bad paper??

I hope we're all not out on the street in a year or three.

hmmm... should i be concerned that my RRSP's will be diminished? All the mutual funds that I invested in for my retirement are getting to be worth less as result. Or do I squint and look at the 20 year horizon.

Where they're worth about zero.

*Economically pessimistic currently*.

Economies need to adjust. It's part of the ebb and flow of capitalism. The US economy has been artificially supported both domestically and internationally for the last 30 (40? 50?) years through periods when it should have all but collapsed and, I think finally, the pressure is overwhelming. It's going to suck ass for a few years as lots of people lose investments and homes and jobs, but trying to maintain the illusion that everything is ok by throwing $700b at financial institutions with NO oversight is, in my opinion, a far worse situation.

You can do a lot of good (or bad) with that much money, and I really don't think I can conceive of a worse option than giving it to the very institutions who made bad choices to get themselves into that mess in the first place.

I like the health insurance for the whole country for 4 years or 2000 apple pies for everyone in the country options much better.

I think we need a fiscally responsible plan with oversight and transparency.

well, there are alot of problems here.

first, the bush administration presented a 2 page "bill" about a week ago after the AIG farce forced it to stop acting in an explicitly ad hoc manner and try to act in a bigger ad hoc manner.
it seems to me that neither the magnitude or the meaning of the problems that this was to address have been adequately defined.
without and adequate definition of either, no measure is going to be coherent.
the "strong" argument for passing it was that it "created confidence"----which is rapidly ebbing away.
this idea of "confidence"--something so vaporous as that--being at the core of capital flows, which typically are hedged round with the "science" of economics and the appearance of "objectivity" that follows from equations and so forth--that's a little curious.

compounding this has been the bush people's attempts to overcome their own weakness by trying AGAIN to govern from a state of emergency---panic now comrades---the Clock Is Ticking----tick tick tick--do something do something--tick tick tick.

then you have the revolt of the fundamentalists in the republican study conference, cheered on by the asshat newt gingrich. tick tick tick.

on top of this, you have a totally discredited president who cannot control his own party any more tick tick tick particularly given that mc-cain's campaign has already decided that the only possibility of winning lay with separating "republican" from "bush administration"--and republicans in the house seem to also think this is a good plan...

tick tick tick.

at this point, i think this has reached the level of the truly comic, as ideological crises can become when they play out across large-scale crises in other areas.

meanwhile, any reasonable person looking at this cannot still believe that the interests of capital and those of the rest of us are the same.

i wonder what the next installment of this drama will look like.

the dow is down 532. it is 3 pm. tick tick tick.

If that bill passes, you'll end up with double digit 'official inflation' - AT LEAST - and a subset of banks that can bully the govt at any time they like. Financially unstable, over-leveraged to an insane degree and way, way, way too big to fail... but they will eventually, or keep the economy stagnating so long that... whatever. Japanification.

How people are standing by and applauding as huge banks are gobbling up the good and a part of the bad of other huge banks gone sour, while passing the buck to money supply and tax payers is beyond me.

Choices:

Weimar Republic (with US constitution Mk II) OR Great Depression II (Bigger, Harder, Shorter)

Both options mean the death of Empire.

Sorry.

DJ @ 8k by the end of the year. (that's putting it back on 20 yr trend and bleeding enormously considering inflation) FTSE 100 has lost 30% in 5 months.

So far, the printing presses are keeping the enormous wolf at the door only slowly tearing at the door. It won't stop it... You can't borrow or print your way out of debt.

[Opinions based on following Kevin Phillips, Krugman, Nouriel Roubini, Calculated Risk and Naked Capitalism fairly religiously over the past year or so, plus watching the explosion of debt in the UK and the rest of Europe with disbelief, following the insanity reigning in the US via t'interweb.]

EDIT:

This all makes me wonder if those Neo-Cons (and New Labour, Uk-sians) are, really, all incredibly deep cover socialists after all.

Viva Bush! Viva Blair!

Marx: Give capitalists enough rope and they'll hang themselves. ;)

I couldn't agree more.

They'll revise it and it will eventually pass.

my favorite bit of debris from this so far is the republican blaming pelosi's speech delivered before the vote for the vote.
go conservatives! way to accept responsibility!

well the most fiscally responsible plan would be to let the banks fail. I'm sorry, and yes it sucks..and will suck, but that's what happens when you write bad paper. If I own a small business and I make dumb choices..I lose my business.. it shouldn't be any different just because you are a bank.

Why should the government bail these companies out?? All the red flags have been there for years.. nobody seemed to care.. partly because they thought they were big enough to get by.. and partly because in the back of their mind they figured the government would bail them out. I say call their bluff and let em fall. Maybe if enough pain ensues, the people will learn how to run a company.

what exactly constitutes "fiscally responsible" in a situation that (a) threatens the global capital flow system as a whole on the one hand, but (b) cannot apparently be given a coherent or stable value on the other? no-one seems to know how big a problem this is because everyone---all the rational market actors in this the best of all possible worlds which we call capitalism 2008 stylee--everyone was lying about the values involved with these devices. so what's a "responsible" action here?

I used open verbiage intentionally to demonstrate that the talking heads need not understand the problem to sound like they do. I doubt there are more than a handful of people in congress that have any clue about how to solve this, and I doubt many of them agree.

The only true solution to this problem is a reorganization of our entire economy. Anything less is patchwork on a crashing plane, and anything less is cowardice.

Some people believe that fiscally responsible means spending only money you have, expenses never exceed income. When capital projects are to be undertaken, either savings or generating credit lines based on reasonable debt to value ratios, and the ability for the borrower to repay within the confines of the income and expenditures.

Some people believe that fiscally responsible means using other people's money to pay your expenses and generate your income. Expenses can exceed income as in the long term income will grow over time, and borrowing at low interest rates can bridge the gap. When capital projects are to be undertaken money is borrowed and refinanced and refinanced to draw equity to pay down other expenses.

Some people believe that fiscally responsible means making sure you cover your cashflow. Income and expenses need to be generated and paid, and so long as everything juggles just right, all markers and debts are paid the absolute minimum.

At some point in time, when you stick your hand into your pocket and you can't pull out $5 bill to pay for that Matcha Green Tea latte with skim milk... I'd hope that's when you realize that fiscally responsibile means something more than paying your bills at the end of the month each and every month.

China halts US lending:

so wait...the problem is not what is implied by the notion "fiscal responsibility" in the abstract---and your view presupposes a bunch of things are true which are only true within a particular frame of reference, but i dont want to argue about that now---i meant what is "fiscally responsible" *in this context*?

i'll get back to this later...

I hope the opponents to this are happy when their company can't give them a paycheck.

Kutulu, the only thing this bill will do is delay this crisis and create a new one.

Greenspan will, throughout the ages, be known as the greatest socialist who ever lived.

that's what my point is. it's so subjective.

I'll keep getting paychecks. We're in a boom period despite the bad insurance market. It doesn't hurt that we're owned by one of the few banks doing ok right now. And that my company, office and team have a habit of timing things right.

In the big picture, I think that the conservatives have this right. The taxpayers aren't here to take on business risks, which is what happened with AIG (as an aside, it now looks like the US could make up to a 30% return on that loan). The bailout has no reward for the risk being taken on other than the nebulous idea that the sky will stop falling.

It is amazing what happens with a small crisis with an incredibly unpopular lame duck President. Especially since the vote broke more down philosophical lines than party ones. Crazy.

The problem, kutulu, is that the system has already failed. As in over. As in past tense. The full effects haven't hit us because that's how the economy works, but we can't stop what's already happened from happening. No one is going to be happy, but throwing more money at a problem when all that will happen is that the country will be in more debt and the problem will only be postponed (and worsened in the meantime) isn't a solution at all.

Economies cannot be in a state of perpetual growth and ours desperately needs to contract and get rid of all of the waste, speculation, corruption and shitty investments that are clogging it.

If we're going to spend $700B on something, let's spend it on softening the impact of the collapse/recession/failure/depression/etc. on the American people as a whole instead of throwing money at banks, because they're not going to change anything, and are going to need another bail out eventually.

+1

I don't approve of any capitalist government that puts training wheels on private corporations. They're big boys now. They should learn to fall with some dignity. Ya know, like the dinosaurs did.

Everything is cyclical. Including epic financial failures.

*keys up "Circle of Life" tune from that old Disney flick*
-----Added 29/9/2008 at 04 : 56 : 17-----

If your horizon is 20 years, you're likely OK - although now is a good time to review your plan and goals and make adjustments where required. Just don't go locking in your losses and buy a bunch of GICs, that's a sure way to ruin.

This bring's to mind what I saw on "Food Detectives" yesterday about possible cures for hang-overs.

Apparently, the good 'ol "hair of the dog" doesn't cure the hang-over, it mearly postpone's it while the body works on breaking down the new alcohol before going back to work on the remaining metabolization of the initial intake. Then, welcome back to the headache, cotton mouth and all around feeling shitty.

I hear there are alot of 3 martini lunches in D.C...

O'kay, guess I got 'nuttin. Really. I don't understand much of this fiasco.:confused::oogle:

Can we stop with all the Bailout = Socialism nonsense... The bailout is not socialism but rather just a continuation of crony capitalism.

Socialism takes the nation's wealth an redistirbutes to the wider population. This bailout was never going to do that. It was going to benefit only those in the upper eschalons... The ones who were going to pay for it were the wider population (Public wealth into Private hands).

I haven't noticed that too much in this thread, but it's absolutely correct. I think there are a lot of people who love to throw around the names of various economic systems without having a clue what those systems actually mean.

Sweet. Totally my point.

Somebody with a superior intellect explain to me why the US gov't is such a selfless charity.

...

In other news... my IRA just farted and fell over on its knees.

i saw this a couple of days ago.


this comes to mind.

let them fall and lets bring in a more stable currency.

he made a good point on another video, about how if i was to make my own money i would be called a counterfieter. but the FED RESERVE can do this all they want.

this is not a political post, but i follow a little bit, and it has come to me that if i want reasoning, i will visit here or look up Ron Paul. haha.

I think this is a much bigger deal that you people will admit. It's gone way past bailing out some fat cats. This is about keeping the market liquid. The shit will hit the fan if the credit market freezes.

How are businesses going to get short term loans for payroll? How will they make capital purchases? This will affect us all.

I know it's a big deal. I just think that's what happens when you let this much economic pressure build up. We've done everything we can to preserve a foolish illusion that economies can always grow and that recessions/depressions can be wholly prevented. I don't think they can, and I think they're a normal and important part of a healthy economy. By redirecting that economic pressure to artificially prevent small drops, we've led to an inevitable large drop.

And, as I've said, if we can muster $700 billion, we can use it to help the entire country instead of trying to use it to "bail out" some big banks who ought to fail for being bad business. Does that create something of a credit crisis? Yes, a major one. But that's something that, at this point, I think needs to happen before we can get things back on track. You said it yourself? Where are we going to get credit? That's the problem. We're plain, fucking out of credit. This country, both the federal government and many of the citizens and businesses have run out that line as far as it goes, and eventually there's no more credit to be had. I'm not pretending this is going to be fun to get through. It won't be. But making the problem worse by adding further credit bloat by tossing more money (spirited in from...somewhere?) at it isn't what we need.

We need some politicians who have a shred of a clue about economics. We need to let the economy adjust itself. We need transparency. We need a balanced budget.

kutulu... I realize it is a big deal and I agree that it has gotten to the point where something like the bailout needs to happen. For me, I am sure it failed not because people disagreed on the idea of a bailout but over who would control the cash and how that bailout out take place.

Some have the idea that it should just be a handover of cash to those that fucked up. Others feel there should be some strings attached. Others... more than just strings.

Me? I can see the need for this but I don't want to see the fuckers that are responsible for this walk away with millions in their pockets. Compensation? Sure, just not the kind of golden parachute they have in mind.

I'd just like to say, my comments about Greenspan being socialist were tongue in cheek... basically, this is still more of the last 35 years:

Lets borrow our way out of trouble (private and public)!

I hated Newt G [Dawg], but fairly, paying off the debt and balancing the budget were the only way to stop this insanity which REAGAN spawned.

I'm happy it's here, because, basically, there's NOTHING that can stop this system from collapsing. The only question is the velocity.

Citibank has taken Wachovia, but... give it a few months more of falling house prices and we'll more than cover the leg room Wachovia's assets have given them, bailout or no.

despite my marxist side, i don't see collapse---i see slow motion devolution of one configuration and the gradual re-emergence of a different one.
what seems clearer and clearer that the american position in the global economy is rapidly coming unravelled, but it isn't yet obvious what that means.
there is no coherent force from the left bringing pressure from outside the system to push it in a direction that is not already implicit in the operation of capitalism itself. and if the shit really hits the fan in the states, it is still the case that any such move would probably come from the right. but i don't see that happening either at this point---the right is marginalised (in that its discourse appeals only to itself) and internally fractured. so if you look around, the likely tracking forward of this debacle is still well within the framework of capitalism.
but the situation that the united states has occupied is coming unravelled.
and if things move in a straight line from here, that unravelling could be ugly indeed.

I might write in Ron Paul's name in November. I do think that some regulation is needed, however the dollar failing would be much worst than a wall street crash or anything like that.

This is a really complicated problem and it is hard to come up with what would be the best course of action. If we do nothing, what will the free market do? My house can't go down too much and I'll still have my job. But, what if your house has lost $100,000 in value? You can't sell it, you can't move, and if you lose your job or your business, your screwed. Well, actually the bank that issued you that loan is screwed if you declare bankruptcy.

The reason I see collapse, eventually, is EXACTLY why you see loss of hegemony.

If the rest of the world no longer see an unipolar, American-centric world, why on earth would they continue to fund the US national debt? Why would Saudi Arabia continue to support its reputed, massive holding in DJI stocks - particularly in the US when some of those corps could easily switch base. Why will central banks around the world continue to prop up the US dollar - and make no mistake, they are in a big way - when Pax Americana is over, done, dusted, volumised and demoted from the NYT best-seller list?

Will the US happily slash its military complex down to a size that's reasonable for an independent, but not dominant nation?
Will the US be easily able to tolerate not denominating the primary currency for the global economy?
Is the US well placed to restructure it's energy supply away from oil?
Will the US be able to restructure quickly enough to tolerate the shock of it's credit lines being reduced/removed?

These things tend to go slowly, slowly, then hit a point and go for a vertical trajectory.

I've obviously some lefty leanings in this, but it's capitalist reasoning that's forcing the logic. I don't expect everything to go overnight... It'll be over a decade or so, maybe less.

For one reason why the US is no place to put financial confidence, look at the DJI.

14k to almost 10k within a year. Factor in inflation, REAL inflation, and the index looks like it's been spectacularly stagnating for the past 20 years at least. The dollar has had a bounce, only because the FED has miraculously, but no less finally maxed out its abilities to raise interest in dollar purchases while the money supply has gone through the roof.

At some point, the loonies in charge of the system have to realise the madmen are in charge of the keys.

I think the dollars hit it's high mark. Someone asked what happens when your house looses 100k in value. Well that sucks if you've been using it as a Visa card, no doubt. But what happens when your dollar on the world market is worth 25% of what it was? Compound that by the fact the US imports nearly all it's consumer good, not mention oil. The cost of consumer goods could shoot through the roof.

Further to my comments about crony capitalism vs. socialism, I think it is important to note that the New Deal was not socialism either...

One of the main components of the New Deal was the creation of rules and regulations for the stock market... rules and regs that created a transparency in the system. These clear rules, a levelling of the playing field as it were, made the US markets *the* market in which to invest. The deregulation of the system removed much of this oversight and transparency. So much so that we now have many that do not trust the financial results being reported by US firms.

There is going to be a long climb out of this hole (a financial and an ethical hole).

This is what started to happen to the UK in the 30's, then dramatically post-WW2 and post-Empire up until the 90's.

Empire is a curse, but a temporary one.

Eventually the power learns its lessons, pulls in its blunted claws and sets about licking its genitals.

;)

Before I add my thoughts, I want you all to know that I've read a few books on economics, and I am as qualified to talk about this subject as Ray Charles and Stevie Wonder are at telling me how many fingers I'm holding up (Actually, they would probably be a bit more accurate than what I have to say)

I think the market will dip further, and further, and we are going to have a market crash, a good old fashioned depression, like my grandma lived through. Even if the government "bails out" everyone, where is the money going to come from? I believe I heard they will just print more, causing inflation and devaluing of everything.


I see "poor" folks (those without investments) not noticing too much, until businesses go out of business, and they don't have jobs, and so they can't afford what little they have now.

The upside is, I think, we will start to focus on what matters and realize that not everyone needs an Escalade, a PS3, two computers, and $120 jeans. Think about it, it all stems from people thinking they have a right to things they can't afford. "I know I only make $20,000 a year, but fuck you, I'm an American and I deserve a $300,000 home, now give it to me." On a smaller scale, "i don't have the cash, but I want those shoes, so I'll just put it on credit." On a larger scale, we have a war and we borrow cash from other countries for what we want RIGHT NOW. It's back to bite us on our greedy solipsistic asses.

If somehow the market doesn't crash, we still have that massive debt. China and other countires will want their money, we won't have it, it will take it in land. They will move thier factories here and we will be cheap labor, and Chinese people will complain about and mock things "made in the USA"

We've had our time in the spotlight, we have to get off the stage and let the next act do it's thing.

Ok, I'm done. If you are still reading, thanks, but that is 1 1/2 minutes of your life you won't get back.

Perhaps we're turning in to France.

Worldwide respect, respectable birthrate, well-educated populace, stable population (the 'riots' in Paris seem like a standard Saturday night in Nottingham, to me), universal healthcare, independent nuclear deterent, peace with its neighbours, etc, etc, etc.

Oh hang on, what's the conservative meme?

Freedom Fries! (while the economy burns)

France is perfect. What's your point?

They speak French and vote over 10% National Front consistently (if memory serves).

France isn't perfect.

Perceived snark counterpointed with substance on what was being snarked at.

What was your point? "Perhaps we're turning into France"

Come on though, "Freedom fries while the economy burns" <- that's good.

;)

EDIT:

Plus, of course:

http://www.ruggedelegantliving.com/a...ou.b.and.w.jpg

<3<3<3

Thanks for asking. I like the copious use of the flairful "wink" emoticon. Is that French as well? ;)

Conservative meme? Freedom Fries? Assume much?

Admittedly, my comment was intended to push a random button seeing if anyone caught the point before making the point. The original bailout strategy would be breaking new ground where the government becomes a shareholder in business, finance, state and local governments, trade unions, etc. Kind of French-ish.

I look forward to more entertaining generalizations with "winks".

BTW- she's hot, but not this hot

http://farm4.static.flickr.com/3105/...7777c4e826.jpg

The way my father and grandfather described the great depression they lived through I think I would rather have the government step in. There must be some way to implement a system that will not result in a few banks taking us all down. I don't know if this will crash the economy as bad as the '30s but if it is close then it is not worth hanging on to free market ideals.

The incompetance of the CEOs of these companies is unbelievable. How much more do the stockholders have to increase pay to attract people who know how to run a company. I can understand 1 or 2 banks screwing up but why so many tied their (I guess I should say our) futures up in this toxic paper is beyond belief. This sort of thing will cause many more people to loose what little faith they have left in the free market system.

Seems to me as this whole process is just one more step toward the implementation of the Amero.. ..but you didn't hear that from me.

Perhaps they need to be paid less.

I just don't get all the hype over this. We're NOT in a crisis. We're in a recession.. a recession that could possibly hit the 16 month mark. You can look at all the numbers out there and we're not even close to depression numbers. The market dropped 700+ points yesterday..but it was only a 7% loss. In '87 the market lost something like 22%.. so it's pretty pale in comparison. BAA numbers show a deep recession.. not a depression.. so I wish everyone would quit calling this a crisis.

The market goes up and down.. companies go up and down.. but for some reason, we are scared of Wall St. companies going down.. it's a free market and other companies, just as they have, can and will buy these downtrend companies. If people would quit panicking for a moment.. you'd see the market respond a touch.. sure.. the market goes down faster than it goes up.. and everyone is worried about their annuities and 401's.. but making a panic run isn't going to help secure these monies.

SO.. this is why I think the bailout in any shape is a stupid idea. We're throwing a band-aid on a gun wound.. and we've done that too often in too many areas.

I hope you are right. I guess we will soon see if any companies are unable to expand or make payroll. Hopefully the president, both candidates, and most of the so called economic experts are wrong. It is kind of scary though to see what were considered to be conservative companies that have been in business hundreds of years go belly up. It seems like every day we hear of a few more and it is beginning to look like a landslide. I thought I heard the other day that Buffett was scarfing up some of the failures.

so let's see: the nationalization of fannie mae and freddie mac, the nationalization of aig, the failure of lehmann brothers, the collapse of washington mutual, the buy=out of wachovia's banking operations, the near-collapse of several banks in england...definitely business as usual.

a steady tracking-down of home values, an acceleration of mortgage defaults, a destabilization of the entire system of debt generation and circulation...

a reactive bush administration whose neoliberal ideology prevents it from being able to even imagine how to address systemic problems...

china stops lending to the united states---the federal reserve stretched to its limits by the ad hoc decision to take over aig after pressure comes from most of the metropole to act...

the entire american model of capitalism, articulated in earnest since the 1980s, resting on the mutations in capitalist organization begun (@the level of structural alteration) in the early 1970s...the entire ideology for which it stands, which has rationalized it, justified it,,,,the cultural context in which that ideology has long since been blurred into the lingua franca of infotainment transfer..all of it faces a situation that it outside its short-term tiny brain logic.

i don't see this as a Crisis in the sense that dialectical materialism once forecast, the development of "objective contradiction" to the point of explosion, as a result of which Revolution would follow as the Working Class recognized it's "Objective Interests" (with the help of a cadre of professional revolutionaries of course)...but this sure as hell is a Problem and cannot in any coherent way be integrated into the terminologies that are used to describe the ordinary fluctuations with a bidness cycle of x-duration (take your pick---if you create a cycle long enough, everything seems normal)....

the real problems that make this something Outside the normal run of cycle=unfolding is the political dimension of it.
to my mind, what we're starting to see is the consequences of the bush administration policies, which are the most advanced expression of the interior logic of neoliberalism understood from the self-blinding viewpoint of "the hegemon."

while it is possible that the outcome of this may more or less resemble the situation that preceded this, it is increasingly unlikely that will be the case. it'd take some thinking to do it, not reacting to some Crisis Mode which is primarily about setting up an Imaginary Clock that ticks ticks ticks our collective way to one or another version of armageddeon.

when this type of scenario has unfolded---and it has repeatedly---in the southern hemisphere in the context of "trade liberalization" or "integration into the global economy" what stabilized it was the neoliberal "Plan" that we quaintly refer to as "structural adjustment"---this is the same kind of crisis, the same kind of scenario of governing from crisis--but without the overarching institution with the Plan--no matter how brutal (and the imf sap programs were are remain brutal--but in the american media bubble, you don't see it. not enough room for that kind of thing when there's so much in the way of sports to be shown, for example)....when this crisis hits the metropole--the powers that run the institutions that have the Plan, the powers which are the Interests that shape the Plan---then there is no plan.

that's a crisis.

you can call this a crisis because you see big names going down in flames.. but when you look at the numbers.. you don't see a crisis. You simply see the result of big firms getting bear raided by the short sell and you see the result of big firms finally having to own up to all the bad paper they wrote.

We now see the demise of what is known as the Republican Party. They can't even get their vote counts right.. however, I want to point out that during all of this so called crisis, we see the champion of this bill being none other than Bush. Why am I to believe this man when he says a bailout is what we need, when his record shows that we should stay as far away from his economic advice as possible?

The fact of the matter still remains that we will see a deeper run of a recession if a bailout does or doesn't occur, but I am willing to bet our economy will be better off in the long run as a whole unit if we do not look to the government for a bailout. A bailout does nothing to teach lessons of economic failure. It simply tells a corporation that it's ok if you fuck up, we'll just bail you out, which in the end makes the economy even weaker. So again, I say no to the bailout plan.

Unable to expand? Make Payroll?

making payroll is important but also having a solvent company wherein your assets and liabilities aren't like any normal person living paycheck to paycheck.

If such a company exists, well, IMO they shouldn't. They are not credit worthy and shouldn't be extended credit. It's that simple.

As far as expansion, well, when credit is tight it is tight. If some bank is willing to take the risk then it's all good, but just because a business wants to expand doesn't mean it should be allowed to because it wants to.
-----Added 30/9/2008 at 11 : 53 : 21-----
I read this arcticle and completely agree with it. I don't think that I should assume the risk for some bad bettors out there. They took the risk they get the gains, they don't share them with me. Why should they take the risk, and I take the penalty also?

This is their faults, no better than junk bonds. They wrote junk mortgages, sold them to mortgage derivatives, and resold and repackaged, etc. etc. I didn't buy any of those in my portfolio. Why am I supposed to clean up their mess?

gucci--in a way i agree with you (bush's credibility is not even a ghost) but for me that doesn't extend to my assessment of what's happening--i think it's bigger than you do both in terms of causes and consequences--what's more, i think that it is a good and necessary thing that neoliberalism burn, and it seems that this is the way it's to happen. so when i say "crisis" i don't mean it in the sense of PANIC NOW, but more in the sense that i think we're watching an ideologically framed group of people trying to address a situation that's way beyond the abilities of that ideology to frame coherently, and as they twist in the wind trying to figure out what to do, the political crisis--which is what this really is, to my mind---continues to get deeper. trick is that there's no way to measure a political crisis--it kinda is as it appears to be, and how it appears is a sum of what is said about it. not that much different from the economy, when you strip away the illusions of science provided by equations and the "proofs" of economists.

crisis is part of how capitalism works--large-scale crisis is part of how neoliberalism has exported itself to the south over the past 20 years or so--what's different here is what i said before.

well I will agree that we are in a political crisis.. well.. ok.. at least the conservatives are in a crisis.. and I'm not going to really complain about that.

I just want to make sure people understand that we are not really in an economic crisis. Banks are at their own risk when they assume bad debt and repackage that debt and take on debt of other institutions. The only thing that I'm really worried about is all this consolidation. We're seeing banks being eaten up by other banks which leaves less competition..and this is nothing but bad news on the economic front. There was a piece here yesterday about Wachovia consumers pulling their money out on the news that Citi is taking over operations. Most residential consumers will never see the effect of these buyouts but yet they still panic. Panic is bad.. just sit back..relax.. take a few hits here and there and you and the market will level back out in time.. it may take another 8 months or so, but it will level out..and when it does we won't be on the hook for 700 billion dollars..

Yeah, this is the thing I don't get. I am definitely not running to the bank anytime soon (of course, I'm not even IN the US to run to my American bank accounts, but still)... that will just make things worse. In Iceland, the state just bought out 75% of my bank (nationalizing it), which is alarming, but I am also not running to the bank for that.

Okay, actually I did run to the bank today, but only to cash a tiny American check because dollars are now worth 40% more than they were a year ago, lol. :p And 10% more than they were a few days ago. The Icelandic króna has never been so low, it's quite sad. Unfortunately, my check was only for a couple hundred dollars, which is a drop in the bucket compared to how much value we lost in the krónur we have in the bank. (If we want to take that money back with us to the US, it will be worth 40% less than what it was a year ago, which is insane. We are leaving it in Iceland and only coming back to get it once the currency stabilizes--if it does.)

This is definitely worldwide.

From what I understand there is nothing like FDIC in Iceland or many other countries. There are a few that do offere something similar insuring the depositors. Other than that, if the Glitnir goes belly up, our money goes poof.

As far as our money being in WaMu, well that's FDIC insured so I'm not too worried about that as a depositor.

As far as a worldwide thing yes, many banks got bailed out and governements injected money into the systems yesterday across Europe in UK, Belgium, Germany, France, Brazil... of course US media isn't reporting this very well.

Yeah, and you haven't been living here and saving ISK for the last 18 months, with every paycheck being in ISK and going into a Glitnir bank account. We stand to lose a lot (we already have). :shakehead:

You know that it's now 105 ISK to 1 USD, right? Today began at 100.

so a net 200 point loss? I'm not so sure it's a crisis that needs our intervention at all.

banks failed in france and belgium today as a direct consequence of this mess in the united states.
there is enormous political pressure from all over the metropole for the american political system to get it's shit together and "do something" to deal with a crisis of confidence that's percolating out into a credit freeze--the rates for interbank lending at at an all-time high today...

but the dow's up.
so maybe everyone's just making this up.
or maybe there are people feeding on yesterday's wreckage.

no problemo.

I'm not saying that it doesn't need attention, I'm saying that it doesn't need this chicken little running around and attention from the taxpayers. They took the risks, they should fail. Otherwise, why shouldn't everyone then take a risk if there is NO risk anyways?

the only way in which i agree with the political talking head class is that we are now beyond that kind of thinking.
like it or not, the arbitrary investments of belief that underpin the circulations of capital are in serious trouble---there is no moral economy that does not sit atop the same kind of thing.

but there's a side of me that agrees with you, cyn----fuck them, let em burn---but not for the same reasons as you. and then there's the other side of me that thinks this is way way past the point where that is really an option and since we all live here too, we kinda have to assume that Somone can do Something to shore up the financial system in general so that the change that's really needed can get thought out and implemented.

then there's this third side that thinks the only honorable thing for the elected government in power to do now, if they cannot do something, is to resign. all of them. we are fucked, we give up, push up the elections and swear in a new government.
at least that way, the opposition that's been taking shape not just to these incoherent bailouts, but to the entire political order encapsulated in the person of george w bush, would mean something.

but most of me thinks this is kinda funny. it's funny because the paralysis of thinking has been inflicted on so many places for so long in the form of artificial crises and imf bailouts, forced privatization and dumping of american agricultural overproduction in the name of free trade--it's funny to see the same shit happening here. so when i think fuck em, let em all burn, i am really not saying the same thing as you. but i agree with the sentiment. partly.

/counts down the hours until someone accuses you of secretly being Rev. Wright, especially since chickens have already been mentioned in this thread. :rolleyes:

I really am beyond repair since I sincerely feel this was staged long ago for the rich to get richer, the almost rich getting richer, and a new system(soon to come) put back in place so that the aforementioned can loophole it to death and get mega richer,..all the while poor slobs like me and you absorb the repercussions to come.

And people wonder why no one gives a shit anymore.

In the last year the Dow's lost nearly 30%. It didn't do it in one day, but it didn't lose 22% in one day in 87' either. Unless the article I read is wrong. I certainly don't remember a day where the market dropped 22% in one day, then again I didn't have much of a 401k or many stocks then.

Plus I think this situation is a little different. This appears to be a credit crisis, don't think that was the cause of the 87' drop.

All that said I'm not sure this bail out was the right way to go. I feel like something needs to be done... what? I don't have a clue. But if nothing else comes out of this I'm hoping people wake up and start living within their means. IMO, many people "need" way more then they actually do.

+1 to a lack of cheat codes and a Reset Button in the Real World (TM).

Uncle Sam is supposed to put training wheels on big business? Is that like taking my money to help out somebody else who already has more of my money and is doing a shitty job managing it?

If I lose money on my investments (oh, and how I have!)... it was with full knowledge that said losses were just a matter of realistic probability.

it's gone beyond this cluck cluck mismanagement of money business now.
it really has.
i feel like a broken record.

we'll see how this small-frame thinking holds up when the credit lines on your credit cards start disappearing.

but what seems more basic a problem for thinking about this situation--whatever you decide to call it---is that this is a global problem, not just a problem of fucked up management at a few institutions. while the right was working on trying to use a neo-con conception of realpolitik to make the nation-state continue as a viable category, capital flows have moved into a different dimension entirely. one reason that folk seem to be having trouble with this situation is that they keep trying to think it as very small, very limited, involving a discrete geographical space. the ideology you think through is not adequate for the situation.
the other problem is that the right is now being confronted with the class consequences of it's project---the transfer of wealth away from the poor and "middle class" that has taken place since reagan is truly massive--the class interests that the republicans carry shit for are not the class interests that they talk about---somehow, the incoherent hodge-podge they have constructed maintains something of its influence, particularly in the economic sphere--all this nonsense about markets being moral, rewarding virtue and punishing its inverse, all this nonsense about the wealthy being wealthy because they are more virtuous and the rest of us being where we are because we are less than they, all this nonsense continues to have some resonance. but it's all an illusion: what you are doing is naturalizing a class order, and one of the consequences of naturalizing a class order is that when the shit hits the fan and the irrationalities within that order reveal themselves, you have nothing to say. o sure you're pissed off---but you have nothing to say. the political oligarchy operates within the same ideological frame. there's another sector that apparently thinks that the world as they know it, the world that enables them to extract obscene profits using questionable devices without there being any consequences at all, that world is coming to an end--and past that, it doesn't matter. sitting in some gated and guarded community with a vast pool of cash behind, it doesn't matter. you and i don't matter. nothing matters: they have theirs, and fuck the rest of us. and within this ideology, there's nothing to say and because there's nothing to say, there's nothing to be done. that's what you are watching burn now.

Already happened here. Have a airline miles card that had a CL of a completely ridiculous amount. I charged my daughter's new Toyota on it a few years back. I only did that because I left my checkbook at home and figured if I was using a card might as well get the miles. I paid it off that month and yes my daughter paid me back. I couldn't charge that car now. Now the limit is 10% of what it was. I don't really care it's still more then I'd want to have a credit card, but I do wonder if that will lower my credit score.

rb... that's what my point is.

I'm very happy to live within my means of CASH. I charge everything because I'm getting the benefit of mileage, but if I didn't get that benefit? I'd pay in CASH. My lifestyle is to live within the means that I make. If I don't have the cash to pay for the bill at the end of the month, I don't buy it.

To say that it's just "small frame thinking" is a bit dismissive. My version of fiscal responsibility isn't about kiting checks and juggling my cashflow. It's HAVING the cash to pay for what I actually spend. No cash, no spend.

Conservative principle, and simple.

Yes, yes, YES. You just can't tell me part of this BS crisis isn't firmly planted at the feet of US consumers who "need" to consume much more then they need nor can afford. Sure they're the banks writing the "bad paper," but someone's taking that paper and using it buy a plasma TV or $500 video iPod.

I have a some younger friends (yes, I have friends- who knew?) they got married a couple years ago. Both employed but no house- renters. Between the rings, the wedding and the honeymoon they were 40K in debt. Other then the ring, some photos and the memories it's basically 40K spent in two weeks, gone. Most of it went on a CC. What couldn't go on the cards he got a second loan on the equity in his car. I've heard of a home equity loan but a car equity loan? I watched, listened... I stayed the hell out of it. But many family members saw this train wreck coming and tried to talk sense to them. Nope! They knew what they were doing and everything would be fine. Last I heard his dad gave him some cash to keep his car from being repossessed.

Now they both have two jobs. Well she has two jobs. Clerical during the day, waitress at night. But he's picking up every overtime shift he can get. I talked to him right before moving here a year ago. He said he figured if they kept at it for another five years they'd be in the black. As he put it "It's not what they borrowed, it's the interest. He was explaining to me the interest on the car loan was crazy. Turns out the bank wanted more in interest, over time, then the amount of the loan. No kidding, really? Wait till he sees what the total amount of the payments adds up to on a 30 year mortgage.

Oh well, on the upside it was a beautiful ceremony and I guess they had a great time in Paris and Rome.

cyn---to be clear about it, in my everyday life i live more or less the same way as you outline. i don't do it because i find it an expression of principle (i think about other things that way, more food-related usually)...

when i talk about the small frame, its mostly with reference to the debt market meltdown, its extent and implications.

the major agreement is that the underlying cause of this wreckage is the american reliance on debt. living within our individual means is one response to what might be coming. the system features are different---i think the main divergence we have comes down to the fact that i don't link individual actions and the system of global capital flows logically, dont use one as a metaphor for the other. i get confused when folk do it, and apparently misread the motivations behind it.

I can agree that consumers amassed a lot of debt. And in many cases that debt outstripped their earnings.

The thing is, those people should never have been granted credit in the first place. I don't want my bank playing fast and loose with my money by lending it to those who can't pay it back. It's that simple. The banks fucked up and they fucked up using our money... and now they want more of our money to bail them out.

right, this is the confusing thing to me.

I'm all for tightening credit, but tighten it to those that don't or can't afford it.

And for the love of god... freaking EXPLAIN what the F the FICO score really means or does since it's so tied into how you are to recieve credit.

When we mortgaged a house earlier this year, we were turned down by one institution because we didn't have enough revolving credit. We didn't keep enough balance on a card. WTF????

That means that you are likely to pay off your debts and do so early. They can't make money of you that way.

Well.. ok I think the 22% in '87 was just over a few months time..not a year.. however, it took 6 months for the market to restabalize in '87.. so I think if there is no bailout it will take approx. 12-16 months for this market to correct itself. I just can't help but think that this bailout is going to cause even more problems in the future.

This is a credit issue that is now turning into a panic issue and a capital issue. There's only two people to blame. The consumers and their insatiable appetite for instant gratification, and the banks who wrote all the bad paper and repackaged it and wrote even more bad paper. The market can handle this.. it will go way down and partly up for a while but it will correct itself in a few months time. We'll see the unemployment rate go up for a couple of months and then we'll see it shift back down as people get a better understanding of how to handle the new market.

Edit: I forgot to mention that another thing the banks have been doing is pretty simple, but it's starting to bite them in their collective asses. If you are in foreclosure, many times a bank will agree to a partial buyout and a renegotiation. They stopped this practice in order to push a heavy loss into the quarter and make it back up in stock dividends. More loss=share price drop, next quarter the stock raises and they get heavy bonuses. It was all fine and dandy.. until the whole thing collapsed under their feet.

Exactly, credit isn't a rational function of system that attempts to generate a better economy or a better society, as it stands. Credit currently serves only to separate a wealth creator, at whatever level, from some, most or all of that wealth and deliver it into the hands of the creditor. Any and all benefits derived from credit is a by-product, not the intention of its supply.

Evil.

Me - only exists in a cash world, happily.

(damn possessive apostrophes)

On a slightly different note - but relates to the bailout plan: From a Forbes article last week...

The more Congress examines the Bush administration's bailout plan, the hazier its outcome gets. At a Senate Banking Committee hearing Tuesday, lawmakers on both sides of the aisle complained of being rushed to pass legislation or else risk financial meltdown.
"The secretary and the administration need to know that what they have sent to us is not acceptable," says Committee Chairman Chris Dodd, D-Conn. The committee's top Republican, Alabama Sen. Richard Shelby, says he's concerned about its cost and whether it will even work.
In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.
"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."


I feel this shows that it is all just a shot in the dark (as financial institutions like Chase has a trillion + in cash deposits). It has become funny money. I don't know what else to do, but I don't think this will do much but get the US past the election. At what point does it just implode? And for whom? I fear for those like my parents who were hoping to retire in the next 2 years. Ah, yea, not going to happen.

the bailout has been approved by the house


dumb... fucking dumb.

mmmm pulled pork sandwiches...

i'd go as far as retarded. dumb seems to not be far enough.

So what does that mean and how will it affect me?

basically it means in the long run that you'll still be on the hook for the banks giving out bad paper.

The markets would have corrected themselves in a few months.. but no they had to go out and wipe out the debt that banks and their stupid CEO's occured. Which means the banks will have to repay the government.. like that will ever happen.

For right now it frees up the credit market.. which means the banks will simply go back to doing what they were doing.

Dumb. Retarded. Just Plain Stupid.

You will never know. This is on the macro level.

The better question is: Will this make a difference? (To the macro level, that is.)

There is nothing here for those in the housing crisis.

I'm not sure you're right.

But I sure as hell am worried you are.

Seems to me like all this does is put everyone on the hook for a screw up by some.

there's no way to know.
this is mostly theater.
what it'll mean practically will have to wait until there's some practice to have a meaning.

So how about that volatility?

How long do you think it'll take before Monday's big rally gets evaporated?

So is the surge—I mean, bailout—working?

When stocks are way down you look for undervalued opportunities and buy low. A friend of mine bought a few thousand shares of GM stocks last week for just over $4.50/share and sold some early today for well over $7/share; he's an optimist so he's holding the rest more long term...believeing that in a few years it will be worth multiples of the purchase price.

I'm seeing quite a few similar tempting opportunities.

sure there are plenty of opportunities to buy in the market now, but you still have to do your homework. you can't just jump on every small price tag you find.

The bailout isn't really working yet. What I see is the fact that global leaders in the economic world are stepping up and trying to calm fears. People aren't as worried so naturally the market shifts back into the upward trend. It will swing back down again (although, probably not as hard) and it will regain after a short period. In all honesty I see this thing being a thing of the past in about 9 months. Yes.. I think it will take that long or maybe even longer before we see any real market stability.

Bear in mind that, even if bailout works, trouble in banks over the last months must have done some damage to the economy (because of lack of money). I believe at least one quarter of recession is due, maybe more. Plus, the bailout money still needs to work its way to all the businesses that need it, and during that time more dismal forecasts will be published, and some companies will without a doubt post bad financial reports for the 3rd quarter. All in all, more shocks and downturns will occur in the stock market, before prices finally stabilize.

All that if the bailout works. If it doesn’t – may God have mercy on our souls :)

Of course, that’s all IMHO.

Bonds look good value. How about one issued by the World Bank yielding 12% (at time of writing). Hard to see the World Bank defaulting? or is it?

Downside is it only has 1 month life.